We have seen a ton of seed rounds completed over the last 24 months where the start up raises less than $2M of initial financing and has sometimes 4 (or more!) traditional venture firms participating plus a half dozen angels (or more!) in the same round.
Many smart folks have commented on that strategy and whether that is a good idea of traditional venture firms or entrepreneurs. For this post, I’m not going to comment on that topic (1)
But contrast that to the capital intensive investment opportunities. We are often asked to evaluate a Series A round of a capital intensive idea where the company needs to raise $5-$10M before knowing any real data. Those investments are challenging for a whole host of reasons.
In our partner mtg last week I brought up the idea/question: why can’t we have large syndicates for seed/Series A in capital intensive ideas? I think we should and my partner Santo wrote up a good post today explaining the logic.
I’d much rather see 4 VCs funding a capital intensive idea than 4 VC funding a capital efficient seed round.
And hopefully we can together fund some crazy bat shit ideas along the way that take years to figure out.
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(1) OK, I can’t help myself. i don’t like to see more than 2 VCs in a seed round. The important thing for the lead VC and the founder to agree on is how much capital is required. Stage the capital properly and pick angels that will help. And choose VCs that have a track record of leading/following on their seed investments. Ask them specifically what their history looks like with seed investing and follow on. The answer will be quite revealing.